Micheal Bregman

I. CURRENT SITUATION Bregman (B) opened two restaurants in Toronto¡¯s Eaton Centre - Mmmuffins (M): December, 1979 & Michel¡¯s Baguette (MB): April 1980. By July 1980, both restaurants began to stabilize. B has limited experience/resources. B¡¯s objective ¡ú build substantial restaurant chain with one or both concepts.

II. ATTRACTIVENESS OF OPPORTUNITIES Unattractive macro-environment: ¡ü 1980 interest rates (prime loan interest rate = 15.3%) make future less predictable & investment planning hazardous (Hill & Jones 2001:85). If B wants to expand internally, he may need to borrow at ¡ü cost or mortgage part of business. Inflation (1980) also ¡ü @ 10% ergo equipment & inputs (ingredients) costs ¡ü.

Industry environment attractiveness: Industry shifted from retail bakeries to supermarkets with in-store baking, fresh products & low prices. B must be aware of shift of customers to shopping centres.

Key success factors for competing in M & MB markets: Superior value creation, low costs, differentiated product, brand loyalty/customer responsiveness, efficiency, high quality, & innovation.

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Strategy šC distinctive competencies / competitive advantages: M strategy ¡ú specialization, attractive & efficient store design, ¡ü-quality, freshness, simple menu. MB strategy ¡ú ¡ü-quality, freshness, eating quickly in some comfort. MB has ¡ü-quality standards, superior recipe quality (freshness), careful specialization, organization & store design, excellent service delivery system, expert bakers & specialized French equipment. However, success of MB not difficult to replicate b/c: 1) Probably not new enough to have developed brand loyalty; 2) Probably does not have absolute cost advantages (unless processes are markedly superior); 3) Too small to benefit from economies of scale. M¡¯s success is even less difficult to replicate due to simple, standardized menu & ¡ý equipment costs @ only 10% cost of MB equipment.

III. DECISIONS B MUST MAKE w/r/t M & MB 1) Suitability for wide use; 2) Assuming one or...